Since the TCC’s decision last year on concurrent delay in the case of North Midland Building Ltd v Cyden Homes Ltd, the industry has been keenly awaiting the outcome of North Midland’s appeal.
The dispute concerned contractual terms in a construction contract which dealt with the allocation of risk for concurrent delay. The Court of Appeal finally handed down its judgment on 30 July 2018.
Background
Cyden Homes employed North Midland to carry out the design and construction substantial private dwelling in Lincolnshire. The TCC judge commented: “suffice it to say that the house is exceptionally large and was to be exceptionally expensive to construct”.
The contract was a JCT Design and Build 2005 version with bespoke amendments. On the happening of a Relevant Event, Cyden Homes was to give a fair and reasonable extension of time to North Midland, unless certain conditions expressly provided otherwise.
Clause 2.25.1.3 (b) of the amended Contract stated that:
“any delay caused by a Relevant Event which is concurrent with another delay for which the contractor is responsible shall not be taken into account”.
In the TCC, North Midland sought the following declarations:
- that the effect of amended clause 2.25.1.3 made time at large where the Contractor had a claim for an extension of time for a delay caused by a Relevant Event, where that delay was concurrent with another delay for which North Midland was responsible; and
- in such circumstances, North Midland was required to complete its works within a reasonable time and therefore liquidated damages would not be recoverable by Cyden Homes.
North Midland argued that, regardless of the contractual provisions, clause 2.25.1.3 was contrary to the prevention principle and therefore ineffective.
Concurrent Delay explained
Concurrent delay is a period of critical delay where there are two (or more) separate causes: one caused by the employer; and the other by the contractor.
If there is concurrent delay, bespoke construction contracts may set out the consequences (e.g. that the contractor is entitled to an extension of time but not loss and/or expense).
However, standard form construction contracts, such as the JCT, are often silent on what happens if there is a concurrent delay.
Prevention Principle explained
The prevention principle dictates that a party cannot enforce a contractual obligation against another party where the party enforcing that obligation has itself prevented the other party from performing. For example, if an employer prevented a contractor from completing its works by the contractual completion date (for example, by not providing access to the site), the employer could not enforce that completion date.
Where the prevention principle applies, the completion date will either: “fall away” and time will be “at large”, that is the contractor is obliged to complete the works within a reasonable period of time, rather than by a set completion date; or the contractual provisions will operate to entitle the contractor to an extension of time.
Until the Cyden Homes case, there was some uncertainty as to whether the prevention principle would apply to cases of concurrent delay, particularly where the contractor would have been in delay regardless of any delay on the part of the employer.
TCC decision
The TCC rejected North Midland’s arguments and found that the prevention principle did apply. The judge said clause 2.25.1.3 was “crystal clear” in its construction: the parties had expressly agreed what should happen in circumstances where there was an act of prevention by Cyden, as the definition of “Relevant Event” included any act of prevention by the employer.
North Midland appealed.
Court of Appeal decision
The appeal was unanimously dismissed by the Court of Appeal.
The Court of Appeal agreed that the clause was clear and unambiguous and therefore did not fall foul of the prevention principle. If the employer caused the delay, the contractor would be entitled to an extension of time, but where the contractor was also in delay, that period of delay would not be taken into account. Cyden Homes was therefore entitled to levy liquidated damaged for late completion.
However, the Court of Appeal did confirm that if an extension of time clause is ambiguous, it should be construed in favour of a contractor.
Conclusion
The outcome reflects the general approach of the English courts to uphold contractual terms freely entered into by the parties. Parties to construction contracts should seek advice when bespoke amendments to standard forms are proposed to ensure that contractual positions are clear and free from ambiguity.
The decision of the Court of Appeal will, however, benefit parties seeking to avoid the uncertainty surrounding the entitlement to extensions of time arising as a result of concurrent delay and the subsequent levying of liquidated damages.
